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But no one seems to know who the creditor is. Or whether, indeed there is one. And if there’s no creditor, how can there be a debt?
One assumes that some national debt is owed to the central bank of the country which incurs the debt. But this is like borrowing from yourself.
Here’s a snapshot about how some of this debt gets owed:
Ultimately, surely it’s individual citizens somewhere in the world. Just as all company shares are ultimately owned by people.
Governments have two ways to raise money – taxes which are taken out of your income today and debt which is borrowed from your future in the hope that the investment will eventually return something (which may or may not happen – YMMV).
As with company finance, debt has become the default option (check the balance sheets of the big tech companies). If you want big government and low taxes, it’s inevitable.
Our sovereign debts cannot be paid. What can’t be paid won’t be paid. The default option is debase the currency. Every pay check is worth less, buys less, and wage earners are impoverished. Those who saved and purchased commodities, income producing assets, or useful real estate retain ownership while their nominal wealth increases in proportion to inflation. Currencies are collapsing world wide in unison with the same result as in Weimar, Germany. Wage earners become jealous enough of property owners to confiscate the property or worst case exterminate the owners.
Debase the currency – or inflation. Different means, same end. Both “work”.
Yes, owning real assets is the classic defence against debasement/inflation. Sadly only really an option for the rich/financially savvy.
But my original point remains – the effective holders of these debts include us – or rather our children and grandchildren. The same children who won’t (on average) be able to repay their student debts … . What a complete mess.
To whom could the debt be repaid if there is no creditor?
There are creditors who purchase British gilts and US Treasury bonds. You are welcome to purchase a bond at any time. The market is open. The bonds pay less than inflation so most government bonds are bought by bankers and insurance companies.
As Fast Eddie says, they are mainly bought by institutions. But always on the behalf of their investors – i.e. you and I – in pensions funds and the like. These funds only manage the stuff – people are always the ultimate owners. You can also buy directly if you like – I think also through an ISA. Anyone who’s saving for a pension likely has some bond holdings.
Correct. As Liz Truss found out a major holder of Government debt are pension funds. So lots of Government debt is owed to future and in payment pensioners.
Regarding Japan it is interesting that they have vey high levels of personal savings.
https://www.degruyter.com/document/doi/10.1515/9780824863050-018/pdf
If their Government increased taxes then the financial effect on most people would be minimal.
However, I guess they are happier having a large balance in the bank while the Government owes the banks Y Billions.
p.s. I have currently lent the U.K. Government £50000. With a lot of luck they will give me £1 million at the start of next month in return. It is far more likely to be £150 like last month though.
Good old premium bonds.
My parents bought 1 each for myself and my sister. Never had a payout in 65 years.
Now parents are dead and no idea where they are.
Same hee Dr Bob Dad bought all us kids premium
Bobds when they first came out. Earlier in the week I was clearing out a cupboard and found the slip with my bond’s number on it. But I can find nowhere on the Premium Bond site which recognises this number.
Same problem here, wouldn’t recognise the number – looked on the website which is supposed to allow you to track them down but no luck. They needed to know when and where they were bought, by who at what address etc. but as it was an aunt who bought them 40+ years ago – I have no idea.
Yes I’ve got £2 worth bought 65 years ago for my third birthday. No idea if they’ve ever won anything … probably not.
Same here. Number not recognised.
I intended to invest another £49k but decided not to bother.
I won £100 back in 1983.
It’s not Don Poorleone is it?
Bank regulators coerce banks into buying sovereign debt. Recall when Draghi said “Whatever it takes” because nobody would buy EU bonds and interest rates were spiraling higher and higher? Suddenly the news was about bankers and money managers who were jumping off the roof tops of banks. The bonds got bought, interest rates declined, and bankers stopped jumping off of rooftops.